PensionBee Warns Millions of Forgotten 401(k)s Are Trapped in Low-Yield IRAs
Here’s something that might surprise a lot of people: every year, around 2 million old 401(k) accounts in the U.S. are automatically rolled into what are called Safe Harbor IRAs—often without the account holders even knowing it. PensionBee has just released new data showing how widespread this issue is and why it could have serious consequences for retirement savings.
Safe Harbor IRAs were originally designed as a protective measure. When someone leaves a job, any small leftover 401(k) balance under $7,000 can be automatically moved into these accounts. The idea was to preserve the money, not necessarily to grow it. But what has happened over time is that these accounts have become a kind of retirement “holding zone” for forgotten money. PensionBee’s research shows that more than three-quarters of these accounts remain untouched for over three years, contributing to a staggering $28 billion in stagnant savings this year alone—a figure that could reach $43 billion by 2030.
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So why does this happen? The research points to one major factor: lack of guidance from employers. When employees leave a job, they typically have four choices for their 401(k): leave it where it is, roll it into a new employer plan, move it into an IRA, or cash it out. Yet, over half of the people surveyed said their former employer didn’t help them understand these options at all, and only about 10% received written guidance. That leaves a lot of people confused about what to do with their money.
The result is abandoned rollovers. PensionBee found that more than 40% of Americans who tried to move their old 401(k) gave up before completing the process. Some didn’t have clear instructions, others forgot about it, and some found the process too time-consuming. When rollovers aren’t completed, the balances are forced into Safe Harbor IRAs, which usually invest in low-interest, cash-like products with high fees. Over time, this can significantly erode small retirement accounts.
The research also highlights a growing awareness gap. Only one in five people could correctly identify the rules and dollar limits for Safe Harbor IRAs. In a workforce where job changes are common—often up to a dozen over a career—this lack of knowledge can mean decades of money sitting in low-performing accounts.
Romi Savova, CEO of PensionBee, emphasizes that employers still have a critical role. Better communication during the exit process could help people make active choices about their retirement savings rather than leaving them to default decisions. As PensionBee’s findings make clear, millions of Americans are making crucial financial decisions by default, not by design—and that could cost them dearly over time.
In short, without improved guidance and communication from employers, more Americans risk losing out on the growth their retirement savings could achieve, leaving billions trapped in forgotten accounts that quietly lose value year after year.
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